Dish Against the World: Why Dish Network Can’t Stop Fighting

If you’re like most TV viewers, you don’t think much about the constant, mundane negotiations that bring your favorite shows to the screen. But then those talks break down, a contract expires at midnight, and the network you most watch goes suddenly dark.

It happened last month to customers of DirecTV, the largest satellite provider, when for nine days they lost their MTV, Comedy Central, Nickelodeon and other Viacom networks.

But if blackouts mark the height of hostilities in network and carrier negotiations, then Dish, the second-largest satellite provider, has proven itself the carrier most willing to go to the mattresses. It has been involved in 22 of the 42 blackouts tracked since March 2010 by the American Television Alliance, a coalition of consumer groups, cable companies and satellite providers — including Dish.

No other carrier is nearly so blackout-prone. DirecTV, which has 19.9 million customers to Dish’s 14.06 million, has had only six blackouts in the time frame monitored by the ATA. Time Warner Cable, which has about a million more customers than Dish, has been involved in just five blackouts, according to the group.

But the blackouts aren’t the only reason Dish has a reputation for fighting. In June, it dropped AMC Networks in a feud so intense that Dish and AMC can’t even agree on why they broke up. The federal government, meanwhile, is suing Dish in two different lawsuits, accusing it of illegally aggressive telemarketing. (Dish denies the claims.)

In potentially the biggest dispute of all, Dish is locked in litigation with ABC, CBS, Fox and NBC over its Auto Hop feature, which allows customers to skip the ads in previously-aired primetime network shows. Networks say it poses a threat to traditional, ad-supported television, and have asked a judge to order Dish to stop offering Auto Hop.

Dish President Charlie Ergen was a professional card player before he became a satellite TV mogul. One person who has faced off with Dish says Ergen approaches both jobs the same way.

“He conducts himself the way a professional poker player tries to bully people at the table,” the person, speaking on condition of anonymity, told TheWrap. “They try to push around the weaker players and bluff big. It’s a funny way to treat people who are ultimately your business partners.”

Dish says it only fights when it needs to, noting that only a small percentage of its hundreds of contract negotiations lead to blackouts. The company digs in, said Dish Senior Vice President of Programming Dave Shull, to prevent rate increases that would be passed on to its customers.

“We do dozens of deals every single year and we have a very good sense of what the market pricing is for these deals,” Shull said. “When someone comes to us and has what we would call a skewed view of market pricing, we feel it’s our responsibility to take a pretty strong stand.”

Dish is taking that stand as retransmission fees are soaring – and carriers are struggling to slow them down. SNL Kagan reports that the fees went from $313.5 million in 2007 to roughly $1.5 billion last year, and are projected to hit $4.9 billion by 2017 — with consumers absorbing much of the cost.

The hikes come as networks demand more money from cable and satellite providers. Those involved point to everything from more expensive sports deals to salary increases for the cast of “Modern Family” to explain the rise.

DirecTV says its rival is right that fees are going up too fast.

“I think the real story is not how many disputes we get into or Dish gets into,” Derek Chang, DirecTV’s executive vice president of content strategy and development, told TheWrap. “I think the real story is the economic demands that programmers are looking for are just outrageous. We all have businesses to run, and we’re all trying to stay disciplined in an environment where the business is barely growing.”

Dish, based in Englewood, Colo., said in a regulatory filing in July that it lost 10,000 net subscribers in the three months that ended June 30, an improvement over the 135,000 subscribers it lost a year earlier.

DirecTV, meanwhile, lost 52,000 subscribers in the second quarter, the first quarter in which it posted a net loss in subscribers since it debuted its satellite service in 1994.

Dish may say it is trying to keep customers’ costs down, but customers don’t always see it that way. A quick glance at the company’s Facebook page finds a daily barrage of complaints from “Mad Men,” “Breaking Bad” and “Walking Dead” fans demanding the return of AMC Networks.

But Dish says those AMC shows are the only ones on AMC Networks that its customers tend to watch, and that on an hour-by-hour basis it isn’t worth it to pay for not only AMC but AMC Networks’ IFC, IFC Films, Sundance and WeTV.

AMC, however, says the dispute isn’t really about fees. It notes that Dish dropped its networks only after it won a favorable ruling in a lawsuit in which it is seeking $2.5 billion from Dish over what it says is a broken promise to carry its Voom HD suite of channels.

“It is not about rate,” AMC Networks CEO Josh Sapan said in an earnings call earlier this month. “In fact, Dish has not discussed rates with us at all.”

Dish’s Shull, however, says viewers shouldn’t expect a return of the AMC Networks until AMC agrees to drastically reduce its demands. In the meantime, he says, the shows are available on iTunes and Amazon.

The disputes with networks and the federal government aren’t even Dish’s biggest focus: It is also trying to launch a standalone wireless business in order to become, in the next decade, a single resource for Internet, video and telephone service. It bought Blockbuster last year for $228 million in cash to compete with Netflix.

Ergen (left) started the company three decades ago and stepped down as CEO last year to focus on long-term strategy. Though known for keeping a low public profile, he has recently been more open, even sitting down for pancakes with The Wall Street Journal.

At a recent event in Boulder, he explained the difference between blackjack, poker and backgammon. He said the game gave him a good foundation for going into business.

Blackjack, he said, “is very scientific … There’s always a right answer and a wrong answer. Do you take a card, increase your bet, bet big or bet small?”

You shouldn’t tip the dealer, he said, “because it’s your money you’re wasting when you do that.”

“Poker, on the other hand, is a game where you don’t have to have the best hand to win,” he said. “Poker is really reading other people and reading human emotion, which certainly comes into play in business.”

He added that while “luck is big part of backgammon, over a period of time, the real key to backgammon is being able to think many, many moves ahead.”

Which game did he play best?

“I really wasn’t very good at any of them,” he said. “But I was probably better at blackjack.”